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Sydney, Australia’s startup capital? Melbourne responds

Thursday, 4 September 2014 | By Scott Handsaker

Australia doesn't need a startup capital, and certainly not one that operates at the expense of other communities that are popping up around the nation.


Even if we did, there is no evidence Sydney would be the best place for it.


When Mike Cannon-Brookes opined at Sydstart this week that “Australia needs a single city where all its tech startups are concentrated, and that city should be Sydney”, he was essentially suggesting two things:


1. That a single city needs to be the dominant player in Australia in order for our startup industry to be successful.


2. That Sydney has already won the race to be crowned the startup capital of Australia, and that all future community building and government support should be focused on Sydney.


Let’s look at whether these arguments stack up.


Do we need a single city to be successful?


The idea that Australia needs one city to dominate the scene in order to be successful is unlikely to be true. The creation of startup communities is a hard thing to get right, and success does not always go to the biggest and the loudest.


Take Boulder, Colorado as an example. Boulder is a better place to do a startup than Sydney by almost any measure you can conceive of, and yet it has a population of just over 100,000 people.


Clearly size is not nearly as important as quality. You can get great, stand-alone communities operating in various locales quite successfully without worrying about fragmentation of effort.


What about Israel? Tel Aviv is ranked as the second best startup ecosystem in the world by the Startup Genome Project, with more startups per capita than anywhere else and 61 companies on the NASDAQ.


And yet there are other startup communities in Israel that have popped up and been incredibly successful, including Haifa and Jerusalem.


Israel is now widely seen as a “startup nation”, rather than focusing solely on Tel Aviv. With a population of just over 8 million, not even Israel has adopted the centrally planned startup model advocated by Cannon-Brookes.


Cannon-Brookes asks us to adopt the Texas model, arguing that Austin is the leading startup city in Texas.


While that is true, it is hardly an argument for focusing an entire country’s efforts on one city. It's not even an argument that the people of NSW should focus all their energies into the Sydney scene, given that there are still other places in Texas with supportive and successful startup ecosystems.


Perhaps then, that is not how successful communities get built?


If we were going to pick one city, would we pick Sydney?


Even if it were true that one city is eventually going to be the best place to do a startup in Australia, it doesn't necessarily follow that we know who that is going to be.


I cannot think of a single global example where a community has picked an ecosystem winner in advance and set about focusing all their energies in that direction. It’s the equivalent of trying to “pick a winner” before the race has even been run.


Think back to our example of Boulder. Go back 25 years and ask whether the inhabitants of Colorado would have picked Denver (pop. 634,000) to be their startup capital over Boulder (pop. 100,000)?


They would have been wrong, because no one can predict where and how a startup community will emerge. It's harder than that.


That is where we are in Australia. We are Colorado 25 years ago, with all our startup communities in their very early stages of growth.


Strong startup ecosystems are built by founders over very long periods of time. Over the next 25 years, amazing communities will be built in Perth, Adelaide, Hobart, Melbourne, Brisbane, Sydney and others. Some will become bigger and more successful than others, but it will come about through natural, healthy competition.


In 25 years, Sydney may indeed be the best place in Australia to do a startup. Then again, maybe it will be Hobart, Melbourne, Geelong or Newcastle. It really doesn't matter, and we will be far better off as a nation if we encourage all founders to be successful no matter where they live.


Scott Handsaker is the cofounder of Startup Victoria.